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tv   Power Lunch  CNBC  April 16, 2019 2:00pm-3:00pm EDT

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into this. a large group of people figuring out how to restore this. >> the state, france, actually owns the building. >> that's right, and they're ultimately being charged go ahead, please, quickly. >> the final point this in a good way reminds us of another catastrophe. 1914 and it was the great beacons and barons of that period, carnegie and rockefeller who stepped forward to help rebuild grand's cathedral. >> we have to leave it there thank you very much and that does it for "the exchange. i'll join courtney and dom in just a minute on "power lunch. it begins now, 22 seconds late >> no problem, thank you, tyler. we'll see you in just a minute when you get back over here. i'm courtney reagan with dominic chu. new at 2:00. markets heading for record highs but is this steady melt up actually a bad thing two big earnings reports out
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after the bells. we'll get you ready for ibm and netflix. high fliers this year too and a new generation of people entering the workforce what does gen z want in a job and should we give them what they want? "power lunch" starts right now >> welcome to "power lunch." i'm dominic chu. markets are higher across the board today but well off the session highs, creeping closer to all-time highs. the nasdaq crossing 8,000 today for the first time since october and we are seeing the dow up about 25 points. remember, at the highs, tyler, we were up 145 and as low as plus 13. we'll see how the markets shape up now >> i told you i'd see you in a minute let's go to bob pisani, a close eye on the key levels from the floor of the new york stock exchange what's moving, bob >> you know, tyler, we're less than 1% from an historic high on the s&p 500.
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we've been telling you about that and hovering over the levels the triple q semiconductors and banks and industrials. they're the market leaders that's what you want to see. the smh hit a new high today and boeing finally stopped dropping. that's certainly good news there's a little concern out there though about the health care situation look at some of these health care stocks. they're going the other way. investors are scratching their heads around trading nation and united health. up more than 4% and raised the guidance but sold massively into it volume is five times normal right now and at a 52 week low for that stock nearly 10% trading range on the day and that's not a low look at these hmo and managed medicaid stocks. all week cigna. that suggests the medicare for all theme we heard about last
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week, no matter how implausible it might sound, still very much in the air back to you. >> bob pisani, thank you so much your stocks nearing all time highs. it has black rocks he warned what he sees as a melt-up. >> i think we have a risk of a melt-up. not a meltdown here. despite where the markets are in equities, we have not seen money being put to work. we have record amounts of money in cash. >> so is he right and does that mean we are nearing the end of this big bull market let's bring in evan brown. ahead of macro asset allocation strategy and then chief market strategist with prudential financial. thank you both for being here. ladies first, quincy is larry fink correct? are we in danger of a melt-up in stocks >> the fact is, i mean, there is
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a lot of cash in the sidelines you'll see that hedge funds are very cautious, perhaps they're worried about the earnings recession. perhaps they're worried about the economy not getting the momentum that we are beginning to see that the economy is getting a little bit of strength but if the earnings season gives us a little bit more confidence in terms of guidance, i think you'd probably see some of that money moving over into equities. pushing the market higher and you also had money going into fixed income, black rock is a perfect kpafrexample. the money out of a fixed income into equities. giving more volume and, you know, there's an argument about whether volume really matters price is what matters. but volume gives it credibility. it gives it confirmation we have the psychological positive reaction when there is volume and i think we're going to see that coming >> so the volumes are an issue but evan, you keep your eyes on all different asset classes. what are the flows showing you
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and should we be a little bit more worried >> you talk about where flows are going as larry fink says, there's still a lot of cash on the sidelines and a lot of money that can be put to work. we're seeing plenty of buybacks pushing the market higher, but we don't see signs of euphoria yet and we do see signs generally of health and credit and we're seeing in the economy some improvement and china and emerging markets so as much as i would agree there's more risk of a melt-up as opposed to a meltdown, i don't necessarily see it as something unhealthy given the fundamentals >> quincy, where would you say the markets are right now in the way it's evaluating the trade talks with china have we already priced in some agreement now that we've kind of continued to drag this out further and it seems like we might get something or is that still a big catalyst that could add more juice >> i think it is the one issue with the tariff talks is whether or not the president keeps some of the
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tariffs in there and in essence, as an enforcement mechanism because i don't think you'll see enforcement mechanisms in the actual agreement really going to hold also, the president is engaging the eu in terms of talks by keeping the tariffs in if he does, i think he thinks the administration thinks it sends a message to the eu. better negotiate and you better take seriously the u.s. side but that said, i do think it's going to help the market a lot of it is in the market but you have to couple it with the data coming out of china that's also part of the overall size the semiconductors sending a signal for some time but i think the agreement helps the other sectors such as the industrial names and the agriculture, get another boost. >> i'm interested to probe further with either of you with the question of cash on the
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sidelines and flows. because if i'm recalling correctly, most of the rise in the market from the lows in 2009 without equity funds the flows were mostly going into bonds and often out of equity funds. why should we expect the market is carried higher this tile off the sidelines and money going from bonds into stocks >> am i right about that >> i think that's right. i think a big part of the reason we see these big market moves without cash equities is just the lack of equity supply in the u.s. we have the buybacks. >> fewer stocks. >> and u.s. asset shortage and that naturally boosts the market up at some point, you'll want to
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see the return investor jump in and we don't see the euphoria to make us nervous just yet but that's certainly a risk. >> quincy, thank you for those thoughts we appreciate it >> we know the most optimistic and pessimistic countries in the world thanks to a new survey steve joining us now with the happy and the sad. hi rks steve. >> this is not really big data but it is huge data in a new landmark surveys but publicly releasing it and below the all time high and smartly from the recession, the financial crisis came back in at a big jump here. this is gdp. and weighs pretty heavily here
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here's a global heat map showing where the confidence is highest. that's the red and the brown gray and average and lowest in blue and now take a look at the best countries or where people are most optimistic or as courtney says, the happiest united states. india and the philippines, doing quite well china pretty good at 115 what about the most pessimistic? you could see russia followed by italy, argentina and france. so even though these are online respondents, pretty good survey of what's happening in those areas. look at three areas. job prospects, personal financial situation and spending intentions who says it's a good time to spend? india, vietnam, the philippines and the u.s. lead the world with the willingness of consumers to shop but argentina, south korea, russia, they're watching pair pesos, and rubles. we know quarterly how everyone in the world feels all at once, at least the 32,000 who answered this survey online >> steve, i have to say, i'm
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pretty curious about india and india being the highest. >> me too. >> i know you said they answered online is that representative of the whole country? >> it's not. it's the online people but as we're told this morning, they tend to be more upper income people who care about how much they spend because of the impact on gdp and how the economy is going. so you're right. it's not represented as they show the most pessimistic behind me the most obvious you could see is india right here and this whole asian region hich, by th way, has been doing pretty well. look, courtney, it's not how i would make my number one item in my investment thesis but around the world, i might take a look to see what the financial situation was for an idea of how the economy is doing >> i always like when data is surprising us a little bit something new. thank you, steve. coming up, we're less than two hours away from two major earnings reports netflix out with first quarter numbers. stock climbing more than 34% so far this year.
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the key metrics to listen for. ibm releases quarterly results after the bell with one of the best performing stocks in the dow up more than 27% the new focus on clouds surprise the street that's next. you.
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welcome back to "power lunch. ibm ready to kick off the start of a tech earnings parade. the report after the bell today since the last earnings in january, stock up 17%. that outpaces the s&p 500. so is this the beginning of the long awaited big blue turnaround steven milanovic, a hold rating on ibm with $140 price target. steven, thank you for being here with us. besides the earnings estimates of 225 a share and revenues of $18.47 billion, what do investors need to be listening for or know going into the ibm report to be best positioned >> i think investors want to see a relatively clean quarter which we saw in the fourth quarter reported in january and that's why the stock was up quite a bit. you want to see services margins improving. you want to see revenue and then the sense ibm is more relevant
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in the cloud their pitch is we're in chapter two of the cloud chapter one was the public clouds where they lagged and then moving enterprise applications which ibm knows a lot about to the cloud and helping customers do that. >> that was a perfect segue to what should be the next question here we talk about the key areas of growth for the business and noted that ibm has said, look, we're a little behind when it comes to cloud and emphasized watson for a time. and now talking about this chapter two of cloud do you think they are positioned in a way where they can grab on to that growth and an area that's very competitive? >> i think the story makes more sense than trying to push watson some more management they're bringing out better offerings and run on the amazon and azure, microsoft clouds i'm still a bit skeptical with cloud consultants. ibm's name does not come up first. customers are probably still looking more to amazon to help
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them do this but ibm has a shot here and a services company. they claim for every dollar spent on infrastructure, $2 to $5 spent on services they need to show the street they're taking advantage of that the first quarter of the year. i don't expect huge fireworks but see a fairly clean quarter >> so much placed a lot of pressure on ibm and ceo about the idea these growth initiatives need to show something. cloud, ai, everything else so is there a chance in this earnings report coming up that we actually do see that revenue trend really in a positive direction? >> well, probably not the revenue because revenue we expect is down 3% reported you've got currency head wind and they are in the downside of their mainframe cycle. so i don't expect to see a real upside in revenue. i would expect to see some margin improvement and that would be kind of my focus for this quarter i think as we get later in the year and they potentially move into a new mainframe product
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cycle, new revolution growth acceleration i wouldn't look for that too much tonight you want to see reasonable stability at the top line which they have shown and margin improvement that gets you excited about what could come the rest of the year. >> is stability enough to move the stock price higher we mentioned it's up outpacing the s&p 500 since the beginning of the year but you have a peer performer or hold rating on shares. >> i'm not convinced the company is fully back yet as we talked about the cloud side i do think they need to reiterate the $13.90 in earnings for the year which i think they will the stock has recovered in part because it got hit so hard after they reported the third quarter last year in october but the fact is, people atech i great. i think the stock has a chance to move somewhat higher but i don't see it as a market outperformer a significant way from here. >> let's get your thoughts, steve, on apple and play would you rather would you rather apple or ibm? >> the longer term, i'd
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certainly rather apple peer perform on both in the short-term, i think apple is ahead of itself and ibm is in a good stable situation and apple is a little bit ahead of i.t. a itself and people are bulled up on the services, which is great. but i think services revenue at risk of slowing and into next fiscal year, the iphone business love apple the brand and where they could be longer term but i'd say in the short-term, ibm and the long-term, apple. >> just some news right how on apple as well, guys. just coming in here. this is with regard to ibm's initial response to the tragedy at notre dame with paris ibm is saying they are going to commit to a donation of 1 million euros up front in cash also an offer to match one for one, dollar for dollar for employees looking to contribute to the notre dame rebuilding efforts, also, 250,000 euros worth of advertising on the
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weather channel application as well as the deployment of services to the reconstruction of the actual facility so a massive donation. you know, massive donation but corporations may start to get a little bit more involved in this as well. >> total, the french oil giant in and then tim cook said they were going to participate. didn't put a dollar amount on it >> thank you, steven you've given us a lot to think about as we look at the ibm earnings after the bell. >> we are just two days away from the next big tech ipo pinterest. up next, why one state could make big bucks from the latest round of offerings and move over millennials. generation z they're swrg enterientering thee workforce. what they're looking for in a job and what it means for business "power lunch" will be right back
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isn't just a result, it's a responsibility. emerson. consider it solved. well, it's not just wall street buzzing about the current tech ipo boom. it could also create a huge tax wi windfall for the state of california robert franks with us to break down the numbers and you wouldn't think of it a windfall for california?
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>> yes, taxes. california loves taxes and ipos and this could be the next california gold rush nearly $200 billion in ipo wealth generated in the coming month. uber, pinterest, slat, post mates, palentier they could create a market cap with $180 billion to $200 billion and all based in california founders, executives, venture capital partners all see big gains on the early stock capital tax gain as wages with a top rate of 2.3%, the highest in the country. the tech employees who have stock options, they don't have to pay taxes until they exercise the option and also sell them. so that could take months or even years to finally trickle down to the tax rolls, estimates of that $180 billion, the corporate founders, employees and executives could own about $60 billion so the eventual tax
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windfall for california would be $8 billion over several years, not to mention the taxes from all the investors and angels san francisco could get a big chunk of that since now it's payroll tax, also applies to stock options as of 2017 and now california, amazinglamazingly, a high tax state is flushed with cash projecting a surplus of $20 billion this year which it plans to spend on a lot of good things like education, housing and health care. >> thank you very much robert let's go to michael santoli now for "trading nation. mike >> thank you, tyler. today, we are looking at a tale of two health care stocks. united health group sinking after earnings while shares of johnson and johnson head higher. health care is the worst performing sector so far this year let's check in on the group's vitals your show "trading nation" today. let's get started on the two names. you would have thought that expectations for united health were low enough, given how the
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stock has performed lately i guess not low enough where do you come down on these names? >> i could not be a buyer of u&h after this bad day and even worse week here's why the average true range, a measurement of volatility, is broadening as we're seeing new lows and lower lows and ultimately, the 50 day moving average crossed below the 200 day moving average in february this is the death cross. i want to get out of the way of this for now but for j&j, i like the way this looks a trend like going back to 2016. and there is solid momentum with the 50 day moving verage, out about the 200 in february. ultimately too, if we close stronger here and make new highs, i think this is going to bring a tailwind and you're going to see some momentum higher >> mike, obviously, on a fundamental basis, a little bit of a cob trast ntrast instories. looks expensive but hated from the perspective because policy risks, j and j is the stalwart quality in the group
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how about you, what's your take? >> yeah, we don't boast stocks that i think both had excellent quarters johnson and johnson is a high quality company. you know, they beat on earnings and revenue. consensus, they upticked the organic growth rate. a good yield and consistent company. we own it, continue to own it. the stock i think we should be focusing on today is unitedhealthcare you know, unitedhealthcare had a fantastic first quarter. they beat earnings, raised 2019 earnings they had excellent cost management of their medical losses but the stock is selling big time due to political noise. now, one thing i know is that, you know, politicians, they have consistently, for years, attacked health care costs and the health care system i also know that nothing gets done and it keeps going. so today, i would stake advanta -- take advantage of this and cheap company growing revenue, high single digits and growing mid teens. so i would own it today.
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>> all right that's a leap. because that political will be here for a year and a half we'll see how it plays out in the show "trading nation," thank you. web site or twitter at @tradingnation. ahead on "power lunch," just moments away from the release of a brand-new survey on america's small businesses how does main street feel about the economy right now? plus, why some are saying the recent wave of deregulation could be costing big business big bucks. head live to the side of the costly chemical spill in texas coming up and netflix after the bell is this a make or break report of the streaming giant all this and more when "power lunch" returns after this break. >> now the latest from tradingnation.cnbc.com and a word from our sponsor. >> when the market is moving higher, many technicians look at market breadth indicators such as the advanced decline line for confirmation the market has bad breadtthit
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we've got a market flash on boeing and philip lebeau has it.
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hey, phil. >> tyler, look at shares of boeing moving higher within the last 15 minutes and that's because of a post that was just put up by the faa and it's a post for public comment. essentially what this is is the standardization board basically putting up what the software fix and what the plan is for training pilots who fly the 737 max. the two important things that are driving shares higher is that essentially this document posted by the faa essentially says that the pilots will no longer or will not have to change how they would handle a runaway stabilizer situation, which is what the situation was with both lion air as well as with the ethiopian airlines crashes of 737 maxes that's important because it essentially is saying, look, the plan that boeing has in place or is going to be submitting is likely the right plan but they're now opening this up for public comments. one other note guys, this plan
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does not call for additional pilot training in a simulator. there will be computer based additional training for the max, but not in a simulator and that is crucial for airlines because it would not mean as much cost or as much delay in getting the 737 max back into the air once cleared to fly again by the faa and other regulatory agencies. >> philip lebeau the next event in the saga. boeing shares up 1.5% right now. time for a news update with sue herera over to you. >> thank you, don. what's happening at this hour, everyone white house national council director larry kudlow the talks with japanese negotiators are continuing describing it as healthy that both sides are in discussions over trade >> the talks are thick and hot and heavy and i think that's terrific japan is a great ally of ours. i don't want to comment on outcomes or any details but i think it's already healthy when we're talking. >> pakistan security forces targeted a suspected militant
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hideout in the northwest city with a large blast and comes after security forces raided the building monday night acting on intelligence about planned attacks. that triggered a 15 hour shootout in which one policeman and five suspected militants were killed. venezuelan opposition leader juan claiming credit for the first shipment of humanitarian aid from the red cross that delivery marks the thacit recognition his country is in the throes of a humanitarian crisis that's the news update this hour, don, back to you >> thank you very much, sue herera the regional federal reserve banks releasing the 2019 small business credit survey kate kelly joibi kate rogers, what's it say about the business environment >> the banks just released the small business credit survey an annual report that focuses on small businesses with under 500 full and part-time employees on their payroll. the report finds year over year
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demand for new financing remained consistent. 43% of companies apply for new capital last year. that's up slightly from 40% in 2017 nearly half received the full amount of funding that they sought some two-thirds though said they experienced financial challenges including difficulty of managing operating expenses, scarcity of credit and challenging repaying their debt two-thirds of these firms also relied on personal finances to covered costs while 40% took on additional debt. also interesting here, nearly one-third of small businesses applied to online lenders, expecting they'd make faster funding decisions, more likely to approve funding and would not require collateral lower satisfaction levels with these online lenders despite the growth those who went to banks large and small said they often had existing relationships that drove those decisions. the outlook for 2019 is mixed. a sunny outlook on revenue expectations with 72% saying they do expect increases and 44% of companies saying they do plan
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to add employees. >> thank you very much appreciate it. for the first time in about 15 years, college graduates donning caps and gowns will not be millennials members of the next generation, called gen z 67 million strong born between '97 and 2012 roughly 17 million of those folks about to enter the works for over the next few years. brought avocado toast and work life balance to the office thank you. can we expect more of the same with gen z tom, founder and ceo of staffing in the recruiting firm lasalle network. a new report what's the class of 2019 want? what do these people want? >> well, we're going to have to add a 27th letter to the alphabet for the next generation >> the compensation was not the top thing they wanted. >> that shows you where the tides are turning with the election with the quote unquote
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socialist movement versus the capitalist drive kids coming out of college are young adults out of college today. they're really more motivated with career path and then coming a third is compensation. >> they want growth and three out of four of them expect or desire a promotion one to two years on the job are they being reasonable? >> in this day and age, they are. you know, there's always been two types of employers out there. historically, one that pays and the other one that gives promotions in lieu of and what we're getting now in this day and age because unemployment has been so low for so long is a combination of both. and so more and more companies are going into that management rotation ge of the '80s and then fast career pathing like enterprise rent a car's training program and combine the two and get what's going on right now. >> tyler said that compensation was number three for what they're seeking in a role but this also shows from your survey
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that company culture is number one for what they seek in a company and i have to say, if you have a company culture that doesn't fit what gen z is looking for, that's harder to change than, say, giving them more money >> there's different kinds of culture. you take somebody who want to be ina stereotypical dot com, that's a certain kind of personality and then some in investing banking or private equity type scenario it's not always one size fits all. there's librarians and then sales people and everything in between. we think culture, we tend to think rah rah, salesenvironment.com that's a culture, not the culture. >> a specific part or industries that these folks want to be employed in? is it technology health care, something else? >> no, it's really across the board and that's why the career path is so important what college grads want to see,
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this gen z, they want to see laid out, if i do "a," what is "b," what is "c," where is the career path going to take me much more linear in thought in a lot of cases than generations in the past that come in and work hard and then allow for management to guide their career they want to know what's going to happen if they execute what they've been told to do. >> i find it very interesting when you look at all of the world events that happened when this generation was growing up, i mean, financial crisis, terror threats, school shootings. another report from usa today said the most digitally connected generation but also the loneliest. does this make them maybe more risk averse as employees if you are employing this generation, do you need to manage them differently and make sure they understand appropriate levels of risk to take in the workplace when it comes to, you know, making bets for the company? >> it really is an interesting dynamic that we're facing with
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social media and kids have been raised to be protective, right so everything you email, everything you tweet, everything you text, be prepared that somebody could see that somewhere. the helicopter parenting there's so many parameters put on today's youth that they get into the workforce, you're dead on and they're afraid to go out on a limb. they ask for permission to do everything and the cliche that was huge in the '90s and the early 2000s, which was, ask for forgiveness, not permission. has really been set to the side because of the way this generation has been raised remember, they came off that it's been, no one showed 9/11 happening to show that video again. we've protected the youth on video and on actual risking and making decisions that's never happened before. i would agree with you wholeheartedly the management style has to evolve and change and that's a challenge for gen x. >> very quick answer, are they more, from what we can tell, are
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they more likely to be more willing to work long hours and overtime than the millennials? >> yes >> that's a short answer >> you asked for it. i gave it to you >> all right, thank you very much >> happy to be with you. a recent chemical spill in houston, texas, could ultimately cost more than a billion dollars. brian sullivan is live in houston, texas, with an up close look at the economic toll. brian? >> reporter: dom, we've got an up close and personal. the fire boat behind us. we take you there and talk to the coast guard about the ancillary effects of some of these disasters. why some believe trying to save a few million dollars could cost billions more and, by the way, something that happened around a different industrial accident that should get the ear of every ceo in america ncat is coming up next on "power luh.
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so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country. industrial accidents, explosions and spills are all bad for both communities and businesses
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brian sullivan is in houston, texas with the look at the human and the economic cost of a recent chemical spill in a ship channel there. hi, brian. >> reporter: is saving $12 million a good economic bargain? >> i don't know, is it to save a billion? >> reporter: easy, but 47 workers in dc. probably never heard of it coming and diving into some of these accidents. the president has been trying to eliminate that industry for three years. congress kept it alive and a number of inspectors quit and come in after the fact after there is an accident look around, figure out the cause, try to make recommendations. so those things happen
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learn from your mistakes in other words. we've got a chance earlier today to go to the scene of what will likely be the terminal fire. storage terminal for these gasoline additives caught fire more caught fire 13 tanks ended up burning. the fire burned for 4 days the men at the port of houston fire department worked literally hundred hour weeks trying to put the fire out thanks to them for that and taking us out today. when we talk about these industrial accidents, you can investigate after the fact but figure out how to prevent them in the future. the cause of theaccidents not just measured in disruptions in lives lost and dollars involved but there's indirect dollars involved and that's why we're here the theory is this yes if something bushes dowrns t costs extra to replace it but all the different things the supply chains, all the ships
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offshore and the scene of the wreck today and we ask the coast guard, what was the ancillary effect of the ship channel or part of it being closed for three days >> i think at this point, we've made a lot of progress i think maybe one touch point offshore about 140 vessels waiting for orders, now down about 80 we've opened the ship channel to day and night traffic 24/7 but it took about two weeks, two and a half weeks from when the actual spill occurred to be able to get to that point. >> reporter: there are still ships sitting out there. that's a month later, guys the idea is this we want to prevent wrecks, prevent accidents, figure out why they wanted. a lot of costs we don't think about. the professor at the university of houston thinks the i.t. material could cost when all is said and done. >> are they trying to quantify
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the costs? >> reporter: i think they are. it's hard to get anything new built. we know that, it's just hard to get refineries and i hate the use the term ugly but more industrial type facilities built. hard, a lot of rigs, take a long time so i get the cost of prevention is high and thoroughly investigate the accidents to see, this happened and therefore, let's make sure that does not happen again and by the way, the one quick thing i need to add there's billions of dollars, lives lost and environmental damage a ceo of arkema had a fire during hurricane harvey. a ceo and number two executive have been indicted and could go to prison. so now we're starting to see neighborhoods get more aggressive not just with money, okay, but with potential jail time as well that's cost, i think, many ceos probably agree is immeasurable, guys >> brian sullivan, an important story for sure thank you so much. out in houston, texas, for us. to the bond market now
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rick santelli tracking the action from the cme, rick? >> yes mid part of the curve. fives and tens outperforming up three basis points three important basis points clearly moving up, ever since we broke through the 255 zone if you open it up to march first, what really jumps out at you, we're hovering at the best levels basically in a month. looks to be testing at 260 close here shortly dollar index since march 1st the thing that should jump out at everyone is how we're just hugging the 97 even area and today, pboc in some liquidity injection. everybody talking about shanghai composite up over 2% and indeed, it was let's take it going back to '06 and yes, right now it's trading, what, in the vicinity of 32.50 at one point, it was 6,000 and then at 22,000 one point, right around $39,000. the point of this is nobody is looking as good as the u.s. stock market
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tyler, back to you >> thank you very much mr. santelli we count down to netflix earnings after the bell. streaming giants moment of truth. the competition getting fiercer. disney, apple, hulu. can netflix stay on top? we'll discuss that when "power lunch" returns in two. makes it beautiful.
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. netflix shares up 35% so far this year. its results are due out after the bell today wall street expects a jump in revenue and subscribers numbers both in the u.s. and abroad, especially there but it doesn't have everybody convinced. joining us is bernie, vice president at rosenblatt securities and a neutral rating on netflix and the price target of 350 a share that's below the current price and julia boorstin joins us as well bernie, make your case why this stock is getting some cold water from you. >> yeah. well, so the main reason we have a neutral on the stock is because of the international side we put in some healthy penetration gains in terms of broadband, percentage of broadband subscribers
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internationally and can't get to consensus numbers. we're about 10% below the street on international ads in 2020 and beyond. >> the international area is where they're actually adding more volume and more people than in the u.s >> 100%. but that's really priced into the stock at this point. >> more competition is coming. how stiff is that competition? how much harder is it going to make it for netflix, which for a lot of the last decade, kind of had the field to itself? >> yeah. 100% so we want to point out that we think that disney plus and netflix both can be successful over the long term, but as disney plus launches, we think there's the potential for some disruption over the near term. netflix is in about half of tv households right now, and that's because it's a cheap complement to the traditional pay tv service. we estimate that every pay tv subscriber, subscribes to roughly one streaming service on average. for the vast majority of households that's netflix.
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if you're a "star wars" super fan and subscribing to one service and don't want to add an incremental streaming service are you going to drop netflix and pick up disney plus? that's the big question. >> julia, jump in here we talked last hour a little bit about this same topic and the competition that is coming there are so many choices now in streaming and more seem to be blossoming every day >> that's right. tyler, we heard about disney plus, but also apple plus, its direct to consumer streaming service which will be entirely different both from netflix and from disney. that's also coming in the fall and then don't forget we also have the at&t/three-tiered streaming services that will be launching, plus the universal ad sunday service which will come next year on top of everything that's already out there remember, there's cbs all access, there's hbo, showtime, that are offered direct to consumer as well so i think what's interesting here is that netflix already has
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massive global reach and they've been investing heavily in global originals. one thing i would hope to hear a little bit from ceo reed hastings on netflix's call this afternoon is whether the originals are actually getting traction outside their home markets. it was interesting listen to him talk about shows like "narco" that were made local language versions of "narco" for mexico or brazil and people outside those countries were watching them i think the question here is how is the investment in original content paying off and how much more room is there for netflix to grow especially overseas? we know the market is more saturated here but what is the potential outside the u.s. >> all right bernie, thank you very much. julia boorstin, thank you as well david faber has some breaking news david? >> yeah, thanks tyler. apple and qualcomm have agreed to a settlement in a long running dispute between the two companies that actually was in court in san diego and continues
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to be in court at this very moment as the various sides offer their opening arguments in a case that was expected to go as long as three to five weeks this is a dispute that's been going on for years, of course, one in which apple has stopped paying through its contract manufacturers royalties and fees to qualcomm, that amount to many, many billions of dollars do not have a lot of details, however. people familiar with the situation tell me that the two parties have reached a settlement, do expect to hear fairly soon more specifics on said settlement that does involve dropping all litigation in all jur dixions around the world between apple and qualcomm and that would involve a new agreement between the two companies for a licensing deal that would extend for quite some period of time and also i am told as well
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involves at least the payment of some kind from apple to qualcomm of some amount so a momentous piece of news here in what has been a brutal battle between these two companies that has gone on for years when apple decided to stop paying qualcomm its royalties saying we are tired, their words, so to speak, of paying for your chip sets and your royalties, double paying in a sense, far more than it's worth in terms of overall the percentage of the phone that you're trying to charge us they have resolved, i am told, they have reached a settlement, and again tyler, we should be getting news of said settlement fairly soon from what i understand. >> david, it's dominic here, i mean we can show viewers right now the reaction in apple has been perhaps a little more muted on a relative basis, but the reaction was very marked in shares of qualcomm which spiked as high as $62.50 on those
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headlines you just brought is the sense here that qualcomm is the ultimate beneficiary, real beneficiary, of this kind of a deal? >> without a doubt, dom. going into this court, again it is interesting, i believe the judge is still hearing the arguments, i think evan chessher, qualcomm's attorney still presenting them and rebutting the opening arguments from apple, but qualcomm had a lot more to lose many would say given its entire business model was potentially at stake here. for apple, while it certainly was a significant battle, one that it has waged very strongly for years now, nonetheless you could make an argument that even if it were to lose at trial, for example, it wouldn't lose nearly as much as what was at stake for qualcomm for qualcomm the idea they are going to sign a new deal with apple, again we don't have details here in terms of what they're going to be paid, receive some sort of back payment for the billions that were owed, that were not paid by the contract manufacturer to
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make apple's phone, you to see that certainly as a positive, potentially one would expect definitely additive to earnings over a number of years and removing significant fear and discount on the shares that we've watched, of course, for quite some time. >> david, thank you for that news i'm sure you'll be contributing later as well. let's bring in gene munster for a quick thought. you heard the news david just reported a settlement between qualcomm and apple. what does it mean for both companies? >> so qualcomm, obviously, i think it's a testimony to the strength of their i.p. apple really wanted to work around this, to not want to give them the nod here, so i think that this is a huge win for qualcomm and really clears apple to start to focus on next gen tech like 5g. >> so, i think you can see that qualcomm, i just was getting a message in my ear, qualcomm stock is reacting as you
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would -- as your answer would suggest. it is up very sharply. apple down very slightly here. we don't know any of the financial details here, but it's really the meaningfulness to qualcomm's future that this represents, right, gene? >> yeah. exactly. this is an i.p. company ultimately, and i think that, you know, it's hard to under state how apple and qualcomm the significance of their rift and the fact that they came to an agreement i think is a significant endorsement regarding qualcomm tech or the strength of that tech. great positive i would mention this, though, this is a win for qualcomm in the near term, it doesn't change apple's long-term trajectory they want to move away from qualcomm i would expect that in the next one to two years they're going to come up with their own chips and go away from qualcomm. >> gene munster, thank you for calling us appreciate it. >> thank you for watching "power lunch. >> "closing bell" right now.

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